A unique propositionOctober 14, 2021
Alvin Mingle, senior managing partner of Fitzgerald-Bassey, and Kwabena Peprah, the firm’s managing partner, talk to The Energy Year about how oil price instability has affected the industry’s procurement dynamics and the weaknesses and successes of Ghana’s local content policy. Fitzgerald-Bassey is an indigenous supply chain and procurement consultancy that assists in the formation of joint ventures.
How resilient is Ghana’s upstream sector as we emerge from the pandemic?
Alvin MINGLE: The recent drilling campaigns of some IOCs are having a positive impact on the industry as a whole after the pandemic. We are suddenly seeing more enquiries, interest and movement, especially from the Tier 1s, the segment we usually work within. The resilience is there for companies and we foresee this being the case for the foreseeable future. Surviving the pandemic for more than a year and a half has shown that it is possible even under trying circumstances. Looking at where the oil price is going and what the IOCs are doing, I think we’ll start to see significant progress.
Kwabena PEPRAH: A lot of oil companies have taken a step back to repackage how they do things. They’ve started applying lean methods and are also reducing their headcount. Aker said the Pecan project wasn’t feasible based on the oil prices during the pandemic, and is now looking into restructuring and coming back with a new format. Even <a href='https://theenergyyear.com/companies-institutions/springfield/’>Springfield, which came out with rich discoveries, has taken a step back to look at how to do things in a different way.
How has the oil price instability affected the industry’s procurement dynamics?
AM: The key thing about the industry is its ability to change and adapt. I think that’s what happened when the challenges hit. E&P companies are using a lot more technology to do sourcing and reducing headcounts to adapt to changes in the oil supply and value chains. The industry is quite robust and that’s because of its agility and flexibility. Companies are changing their models, especially how they interact with customers to reduce their costs and survive.
For smaller companies like ours, it’s more difficult when we are not able to do what is in our strategic plan. The current socio-economic climate has an impact on the overall industry whereby Procurement Plans from the IOCs for example are not being fulfilled according to the estimated time plans and schedules. Sourcing decisions are being delayed or take an inordinate time for decisions to be taken with a resultant negative impact on the industry.
To what extent does the country’s local content policy protect indigenous procurement firms?
AM: Indigenous companies have developed some capability and are stepping up, but if they are not given the opportunities by IOCs then they won’t be able to reach their full potential. For example, some IOCs are still sourcing to international companies without partnering with indigenous companies. That doesn’t align with the current local content policy.
One wonders why these international firms that refuse to partner with a local firm to deliver in-country projects are considered for these opportunities. How will the local companies develop the skillsets and raise their profiles if they are not given these opportunities to compete?
We have a thorough local content law in Ghana, i.e. LI2204. But the question one is left wondering is: is the law being enforced to its full extent? The formation of JVs must be actively encouraged for the indigenous companies to have the ability to learn and grow, and contribute to the quota.
KP: Nevertheless, there are success stories. For instance, among the production chemicals used offshore, the chemicals that can be supplied locally are being ring-fenced for indigenous companies, while speciality chemicals can be supplied by foreign companies.
There are many more opportunities for these sorts of transactions. The government could decide to ring-fence a majority of such commodities for local companies. Right now you see one or two success stories, but there are a lot more opportunities for the Petroleum Commission to define and enforce local content.
What is the company’s strategy for remaining competitive under these business conditions?
KP: Outsourcing everything to a local company is very difficult and may be risky. Looking at only cost, it tends to be more expensive to outsource to an indigenous company rather than to go to another local cost region. We understand the risk that the IOCs have, so our company has partnered with an international company that has the financial muscle and expertise to meet such obligations.
We are strategising with our JV partner to come up with proposals that we can send out to not only oil and gas but also downstream and mining companies. We are looking at other companies we can form JVs with to address the gaps and opportunities within the industry.
AM: It’s going to be an aggressive marketing campaign which will help us diversify our portfolio. We initially relied heavily on oil and gas, but we realised the demand does not have the pace or volume we expected, so we have to diversify. So we’re now looking at other supply chain areas such as mining and telecoms.
What is the current demand for consultancy in the tendering processes?
KP: This type of consultancy is our bread and butter. In the past eight months, we’ve participated in numerous tenders and helped our clients win within the oil and gas sector. We also provide business research on diverse areas. We have demand for these services across the entire value chain and even beyond it.
AM: We are finding there are lots of companies that don’t have the skills to put together winning tenders. They lack expertise in areas such as HSE or local content. They may have expertise in some areas, but not in all the required ones. So we help and assist them in drafting, we look at their policies and make sure they are up to the standards of the IOCs and help them bid. Our aim is to make them successful in their bids with the larger IOCs.
Where would you like to see the company in five years? Where do you think the energy value chain as a whole might be in this period?
AM: Our unique proposition gives us an advantage over the competition. For example, we have a number of services that we provide under one roof. We have a very small, agile team but a lot of consultants and experts we work with. This enables us to work across various categories and areas of expertise. Because of the variety of consultants we work with, we can take on a wide spectrum of projects – be it sourcing for wells, vessels or aircrafts.
We have been growing slowly, but organically. We are very open to looking at different opportunities, provided they are supply chain related. We don’t think of ourselves as working solely in oil and gas even though that is our main area of expertise and where we’ve been operating. If there are opportunities in the area of electricity or distribution, we’ll look at them. I see us growing significantly in the next five years.
KP: We’ve won a number of tenders and built confidence within our client base so they keep coming back and we keep building on that. As word spreads, so we see ourselves doing well in Ghana and in Africa in the next few years.
We found our niche when we got into this business. It’s an area nobody was looking at. We brought everything in-house: supply chain, procurement and tenders. We came at a time when oil prices were low, so of course we had to work hard to get through this period. But over the last three years, we’ve had clarity on where we are and where we want to be.
What are the main characteristics of the 1Dimension virtual portal and how is it impacting the workflow of users?
AM: The 1 Dimension portal enables us to categorise our contractors and enable our clients to transact easily and efficiently in our virtual workspace. The tool enables analysis to be conducted during the supply chain process and allows users to query the data for decision making purposes.
Due to the user-friendly interface and the functionality of the tool, several clients are using the tool for the sourcing and decision making within their supply chain processes.